SKY and Vodafone NZ merger to create a leading integrated telecommunications and media group in New Zealand

Via Vodafone Media

Jun 9, 2016

Key highlights:

  • SKY and Vodafone NZ merging to create a leading integrated telecommunications and media group in New Zealand
  • The Combined Group will have the ability to offer New Zealand’s best entertainment content across all platforms and devices in a rapidly evolving media and telecommunications market
  • The Combined Group will provide an enhanced customer experience and greater choice of products and services, as well as attractive offers of entertainment content, broadband and mobile to meet the growing consumer demand for packaged services
  • Vodafone will become a 51% shareholder in the Combined Group as a result of a consideration comprising an issue of new SKY shares and NZ$1250 million in cash, equivalent to an Enterprise Value (“EV”) of $3,437 million
  • New SKY shares will be issued at $5.40 per share, representing a 21% premium to SKY’s last close of $4.47 and 27% premium to SKY’s 1 month VWAP of $4.25 on 7 June 20161
  • The Combined Group is expected to deliver cost, capital expenditure and revenue synergies with a net present value (“NPV”) of approximately NZ$850 million, or NZ$1.07 per share2

  • The transaction is expected to be accretive to Underlying Free Cash Flow3 per share for SKY shareholders on a pro-forma FY2017E4 basis (prior to synergies and integration costs), with additional benefits delivered over time as synergies are realised

  • The stronger cash flow generation and anticipated synergies are expected to support increased dividends for SKY shareholders5
  • The directors of SKY unanimously recommend its shareholders to vote in favour of the resolutions to implement the proposed transaction
  • Grant Samuel, the Independent Adviser and Appraiser, opining on the merits of the proposed transaction has concluded that “Sky TV shareholders will clearly be better off if the proposed transaction proceeds than if Sky TV continues as a standalone entity” and that “the price and terms of the Share Issue are fair”6
  • A SKY shareholder meeting to vote on the proposed transaction is expected to take place during early July. Approval by shareholders holding more than 75% of votes cast at the meeting will be required

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  1. This announcement and the investor presentation materials released to NZX and ASX today provide a high level overview about the proposed merger of SKY and Vodafone NZ to form the Combined Group. The investor presentation contains important information including important notices and key risks in relation to certain forward looking information in this document and should be read in conjunction with this announcement. More detailed information will be contained in a combined Notice of Meeting and Explanatory Memorandum, which is expected to be made available and mailed to all SKY shareholders during the week beginning 13 June 2016

  2. Volume weighted average price between 8 May 2016 and 7 June 2016, calculated as total value of shares traded divided by the total volume of shares on the NZX

  3. Note that this amount per share solely represents the estimated aggregate post-tax NPV amount of the synergies divided by 794.2 million shares (being the expected number of shares in issue following completion). This amount does not equate to, and should not be read or taken as, an indication of any additional or increased share value or an indication of any likely movement or appreciation of the price or value of the shares

  4. Cash generated from operations less capital expenditure less payments for interest and tax, adjusted to exclude certain one-off cash flow items (a non-GAAP cash flow measure)

  5. FY refers to the year ending 30 June

  6. Refer to the section titled “Future dividends” for further details

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